It’s a
privilege to engage in this discussion with Kristin Collins, William Novak, Nicholas
Bagley, Jon Michaels, and Gautham Rao.
Thanks also to Heather Gerken for organizing and Jack Balkin for
providing the venue.

Here I’ll
respond to a few of the many thought-provoking comments made by the
contributors. My responses rely upon
some events and concepts set forth in the book, so I’m going to provide a
summary of the book, then circle back to engage with the comments.

* * *

The book
pursues two objectives: (1) to show that American government operations in
the 19th century were largely for-profit, in that prosecutors received a fee
for every conviction, tax collectors received a percentage of evasions
uncovered, and numerous other officials were paid in similar fashion; and
(2) to explain why lawmakers abolished these forms of compensation and
replaced them with the fixed salaries we now take for granted in our public
service. That is, I’ve sought to trace how
the absence of the profit motive became a defining feature of “the
public.”

The
conventional explanation for the shift toward salaries in modern government is
that salaries form an integral part of Max Weber’s ideal type of bureaucracy --
a style of organization in which officials serve as cogs in a top-down
hierarchy, devoting their careers to the agency. Fixed annual compensation guarantees that the
official’s income matches his/her level within the hierarchy, reinforcing the
bureaucracy’s internal status distinctions and the official’s incentive to seek
promotion up the ladder. Also, the
attraction of a bureaucratic career lies in its life-long security, and nothing
says “security” like a guaranteed annual sum of compensation.

In seeking
to understand the decline of the profit motive in American government, I didn’t
find the Weberian story satisfactory.
When American offices were converted to salary, I found, too often, that
the features of government organization that Weber links to salary -- top-down
control of the official and the official’s career stability -- did not come
with it. Sometimes these features never
came at all (e.g., in the case of district attorneys, who must stand for
election every few years), or they came long after the profit motive had been
banished for apparently independent reasons (e.g., in the case of federal and
state tax enforcers, prison managers, etc.).
This mismatch with Weber isn’t surprising. It’s well-known that American government
today doesn’t conform as closely to Weber’s ideal-type as do the governments of
most other developed nations -- something Weber himself recognized.

Yet
American lawmakers still converted their officials from profit-seeking to
salaries. Why?

The answer
lies in how American lawmakers sought to shape the relationship between
American officials and the laypersons with whom they dealt. To understand this, we must distinguish
between two different kinds of government services: (1) services that
laypersons wanted, like processing people’s applications for citizenship, benefits,
or homesteads; and (2) services that laypersons didn’t want and might resist,
such as collecting taxes, conducting prosecutions, or forcing prisoners to
labor.

When
officials were paid by the task for the first kind of service, the fee caused
the official to view the laypersons who sought his services as
“customers.” The more immigrants the
officer naturalized (or the more pension applications he processed, or the more
homesteads he granted, etc.), the more fees he made. I term these fees “facilitative
payments.”

When
officials were paid by the task for the second kind of service, the fee had the
opposite effect: it induced the official to take action against the layperson. The
more pain the officer inflicted -- the more tax evaders he caught, the more
convictions he won, the more labor he squeezed from prisoners, etc. -- the more
he profited. I term these payments
“bounties.”

Each type
of payment had a virtue and a vice. In
the early experimental days of American democracy, the virtue of each loomed
large. But as American democracy
developed, the vice of each came to the fore, and legislators acted
accordingly.

The virtue
of the facilitative payment was that, by causing the official to view
laypersons as customers, it infused government with a “customer service”
mentality. Government was responsive to
the needs of service recipients in a way that seems remarkable now. It was especially important that the payments
weren’t much regulated in their amounts, so the officer and the layperson could
adjust the price to reflect exactly what the layperson needed from the officer
(e.g., a little extra money for faster service, or for finding a way around
some technical problem with a form or regulation). But in the American Revolution and the
generation after, unregulated exchange between officers and laypersons came to
seem dangerous. Revolutionary ideology
was suspicious of monopoly, and unregulated exchange opened the way for
monopolistic price-gouging; plus, the unregulated flow of fees into official
pockets meant officials could effectively “tax” the people and keep government
up-and-running even without the consent of the people’s representatives, and
this proved inconsistent with the rising belief in legislative supremacy. Thus, in circa 1775-1850, lawmakers
increasingly passed statutes to regulate the sum that an officer could charge
for any particular service, and when these statutory regulations proved too cumbersome
to keep pace with the growth and dynamism of official business (thus
encouraging ad hoc bargains between officers and laity to keep services
flowing, which were extra-statutory and now defined as “corrupt”), lawmakers
decided to ban officers from taking any facilitative payments whatever -- a
crude but easy-to-administer guarantee against corruption -- and to give them
salaries instead. Meanwhile, the virtue
of customer service came into doubt in yet another way: facilitative payments
caused officers to view service recipients as
a class as their “customer base,” and they construed the law in such a way
as to favor the wishes of that base. Naturalization
clerks construed the law to make it easy for immigrants to get citizenship;
land officers construed the Homestead Act to make it easy for settlers to get
homesteads, etc. But this style of
administration -- strongly favoring the office’s customer class -- is
sustainable only when the customer class is the overwhelmingly dominant
interest group in the legislative politics surrounding the office. As American politics became better-organized
and more complex circa 1900 -- as more groups formed to speak for previously
diffuse and voiceless interests -- they tended to lobby for administrative
reforms that put officers on salary and thus took away their incentive to favor
the customer class. Thus, the new
nativist movement helped get rid of the old fee-paid naturalization clerks,
replacing them with examiners enjoying the salary-based independence to say
“no” to immigrants. The new
conservationist movement helped get rid of the old fee-paid land officers,
replacing them with salaried agents who could say “no” to homestead
applicants. Thus did American government
become sensitive to the rivalry of mass interests that surrounds the typical
program in a mature democracy.

What about
bounties? The bounty’s virtue was that
it incentivized the officer to enforce legislation in the face of resistance
(perhaps violent) from the person targeted and from that person’s neighbors,
friends, and surrounding community. This
incentive was especially attractive to American lawmakers in the mid- to late
19th century, and so the virtue of bounties seemed (at that time) especially
great. The attraction is understandable
when we consider that, up to the mid-19th century, the usual American law
enforcers -- justices of the peace, constables, grand jurors, town tax
assessors, etc. -- weren’t paid anything at all, or were paid so little that
money didn’t motivate them. What
motivated them was that they each lived in a relatively small, homogenous local
community, where serving in an office was something you did as a social
obligation to your neighbors and your town, normally on a part-time, casual, rotating
basis. These people were community
members first and law enforcers second.
This approach to law enforcement -- which I term “familiar imposition”
-- worked fine so long as the laws to be enforced had the support of a
relatively broad consensus within the community, so that enforcement was only
necessary against occasional deviants.
That is, it worked so long as government refrained from making demands
that were out-of-phase with a local community’s prevailing expectations. (Interestingly, this could work even for federal governance: as Gautham Rao shows,
early federal tax administration was successful in part because customs
collectors at each port were deliberately appointed from within the port’s preexisting
family and business networks, and these collectors bent and shaped federal law
to fit the needs of their neighbors.)
But around the mid-19th century, American lawmakers -- in Congress,
state legislatures, and big-city councils -- began to make more ambitious and
intrusive demands that clashed with the expectations of local communities more
frequently than before (e.g., permanently high protective tariffs, permanent
federal excise taxes, skyrocketing property taxes, outright prohibition of
alcohol and gambling, etc.). I term
these demands “alien imposition.” Such
laws were extremely unpopular among some portions of the population, and unpaid
community members serving part-time were not sufficiently courageous (or, we
might say, anti-social) to enforce them.
Legislators therefore began offering bounties more frequently than ever
before, to provide extrinsic motivation to the officers, and they coupled the
bounty offers with unprecedented grants of official power in the areas of
punishment and surveillance. But the
very intensity of this experiment with the bounty proved to be the bounty’s
undoing. Lawmakers found that bounties
produced lots of enforcement, yet bounty-driven enforcement did not reduce --
and quite possibly increased -- lay resistance to locally unpopular laws. This may seem surprising, but it’s
understandable in light of studies in present-day psychology and sociology
indicating that governments cannot achieve mass compliance through brute
deterrence and that laypersons are more likely to comply with an authority if they’re
able to attribute disinterested motives to that authority. Consistent with this kind of thinking,
lawmakers of the late 19th and early 20th centuries converted enforcers from
bounties to salaries, concluding that the change was necessary to make the
officers seem selfless and thereby get
people to trust government more, even (or especially) as its demands became
more alien. The salary aimed at the
legitimation of power.

* * *

William
Novak, in his contribution to the symposium, suggests that the evidence I
present in the book “on the peculiar structures of power and authority
exercised by modern democratic states” cannot be assimilated by any of “the
prevailing modes of thinking about the state,” including the Weberian mode -- a
problem that renders more urgent the agenda of recent scholars to develop “a
more robust genealogy of the characteristics and trajectories of democratic
states.” By “democratic states,” I take
it Novak means not only states that have elections but that also aren’t defined
primarily by hierarchy, centralization, or insulation of officials from
society. I agree with what Novak says,
and I think the book provides some potentially useful tools for the project he
advocates on democratic state development.
Let me elaborate:

In the
story I tell about facilitative payments, America moves from one version of a
democratic state to a different one, with opposite implications for the
appropriateness of a “customer-serving” officialdom. In the early version, politics is
sufficiently simple that what’s required is the basic responsiveness of the
official to the lay claimant of government largesse: a fee-for-service will
keep the largesse flowing. In the later
version, politics is still democratic, but in a different way: more interest
groups have coalesced and muscled their way into the legislature, beyond the
original “customer class,” and a balance between them must be struck, one that
involves taking away the officers’ fees and replacing them with a more
complicated and ambiguous set of incentives befitting the “noisier signal” that
emanates from a politics that is now divided and rivalrous, no longer as freely
“distributive” (in the sense that Richard
L. McCormick used that term).

In the
story I tell about bounties, America moves from familiar imposition to alien
imposition. Again, both can be
understood as democratic modes of governance, but different from each other. Familiar imposition means that governance is
melded with society at the local level -- hence the part-time, barely-paid,
rotating nature of office. This is
“democratic” in the sense that local community consensus, to the extent it
exists, is hard to displace. But as
alien imposition becomes more frequent -- in the form of higher taxes on novel
bases, outright prohibition of alcohol or gambling, etc. -- we observe
democratic legislatures (whether they be Congress, state legislatures, or
councils governing large, diverse cities) asserting the power to alter mass social behavior. This is also “democratic” governance, but
it’s a different meaning of democracy. First,
it’s positivist, aiming to change society rather than reflect its immanent
prevailing norms. Second, it operates
through a legislature elected by a large population, encompassing diverse
communities. Third, it’s democratic in
another, more subtle way. Ultimately
achieving mass compliance with the dictates of these ambitious legislative
majorities proves impossible (as bounty-loving legislators eventually learn)
unless the state builds up a modest but crucial minimum of goodwill among the
many laypersons who’d prefer not to follow the majority’s choices but will do
so if they have some minimum trust in the state generally. Building that minimum trust -- arguably a
necessity for a modern democracy -- is why lawmakers replace the bounty with
the salary. (In distinguishing these two
phases of democratic development, I happily note that I’ve been inspired by -- among
many works that I cite in the book -- that of Novak himself, esp. the
concluding chapter of The People’s Welfare.)

* * *

Gautham Rao
and Kristin Collins, in their contributions, point out that the intersection of
profit-seeking and government is significant not only for our understanding of
government, but also for how we think about profit-seeking -- that is, about
capitalism and commodification. Rao interprets
the book as offering a “twist on the essential functionalist premise of the
legal history of administration,” i.e., the premise that capitalism created the
need for regulation, which the administrative state emerged to meet. Instead, observes Rao, the book “seems to
ponder” the reverse question -- “how capitalism changed the nature and
character of the state.” This is
certainly a worthy question, and one that I hope the book helps illuminate,
though I give no head-on treatment (hence Rao finds me “a bit coy on this point”). The part of the book that I think most implicates
the history of capitalism and markets (which are broader phenomena than
profit-seeking per se) is the story of facilitative payments, since they
(unlike bounties) involved the sale of services by a mass of sellers to a mass
of buyers, at prices that were initially bargained-for individually and later
regulated by legislation (before the final switch to salaries). I hope that historians of American capitalism
will see the book (especially Chapter 2) as adding a dimension to the emergence
of laissez-faire ideology in the 19th century: just as an anti-regulatory
ideology was emerging for private industry, a mirror-image process occurred
whereby governmental services shifted to became a totally regulated industry, in which nobody could buy or sell any
service unless the legislature fixed its price by statute. What this means for the history of
capitalism, I leave to specialists on that subject. (I gesture at the point on p. 93.)

On the matter
of commodification, Collins considers whether immigrants paying facilitative
payments to clerks for grants of naturalization should be understood as
“buying” citizenship. She doubts that
immigrants or clerks subjectively experienced it that way, but she also notes (rightly)
that critics saw it that way -- and that people today will find the idea of
buying citizenship “disconcerting.” To
illustrate, she refers to “relatively recent proposals that would allow the
United States government to sell the right to immigrate and naturalize,” which
include a 1987 proposal by Gary Becker to set the price of entry at whatever
the traffic would bear (on the order of $50,000 per person), such that the
persons “buying in” would be the ones likely to make the most, financially, of
their U.S. residency. As Collins notes,
such ideas have been attacked by Michael Sandel, who argues in What Money Can’t Buy that the
commodification of immigration and citizenship is morally wrong. This raises the intriguing question of whether
the disturbing thing about paying for citizenship (in our eyes) is
commodification per se or instead the setting of the price and its distributive
consequences. In the 19th century, facilitative
payments were often low and thus affordable to the low-income claimants who sought
public services (if they paid the fees at all; immigrants often had their
naturalization fees paid by party machines competing for their votes). In my historical research, I’ve never seen a
facilitative payment remotely approaching Becker’s $50,000 figure (even
adjusting for inflation). To some
degree, this relative affordability was the result of statutory regulation
(motivated by anxiety about monopoly price-gouging), but sometimes, it was
simply officers’ self-interested acknowledgment of what their low-income
customers could shell out. That is, officers
chose to seek facilitative payments on a high-volume, low-margin basis. Notably, in terms of practical outcomes for
those seeking citizenship, the fee system was clearly favorable to immigrants:
fee-driven clerks naturalized people much faster and more willingly than did
their salaried successors. Accordingly,
critiques of the fees as corrupting generally came from nativists. Becker’s strategy is to treat immigration
status as a scarce resource to be allocated to the highest-value user, but the
effect of (low) 19th-century facilitative payments was to make the system generally
more open to low-income claimants. I
suspect this pro-access version of cash-for-citizenship would win over many
(though not all) liberals who would initially nod in agreement at Sandel’s
attack on Becker.

* * *

Jon
Michaels and Nicholas Bagley ask how the salary revolution of America’s past
should be understood in light of government’s diminishing insulation from the
profit motive over the past few decades.
Sometimes by deliberate design and sometimes by half-conscious
processes, the profit motive now seems to be playing a larger role in the
administration of public benefits and in the enforcement of public law than during
the generation (circa 1930-1970) that immediately followed the salary revolution’s
culmination. My book focuses on the
historical formation of the non-profit norm against which today’s trends push;
it does not chronicle those trends or directly address them normatively, though
I do think (as briefly noted in the book’s Epilogue) that the reasons why past
lawmakers abolished facilitative payment and bounties imply arguments (though
not necessarily decisive ones) against the use of similar incentives in
government today.

Though the
comparisons are complex, I would say that some (if not all) of the new
profit-seeking arrangements resonate with the old types of facilitative
payments and bounties whose downfall I trace.
As to facilitative payments, Bagley makes a powerful argument that we
are observing this very dynamic in today’s Medicare program, which was founded
in 1965 and has grown to mammoth proportions in recent decades (more than 15% of
the federal budget in 2010). “By
deciding which treatments are medically necessary for qualifying individuals,” writes
Bagley, private physicians taking Medicare “effectively decide which treatments
the government will pay for,” and these physicians “receive fees keyed to the
costs of those treatments,” which incentivizes them to prescribe more
treatments, expanding the program in a way that meets the immediate wishes of
beneficiaries but threatens the public fisc.

As to
bounties, one can argue that we’ve seen a resurgence of profit-seeking
enforcement of public regulation. This
seems hard to deny when it comes to the False Claims Act of 1986 and the
consequent rise of qui tam suits against defense contractors (and, more
recently, health-care providers) who allegedly defraud the government. One might similarly characterize the past
decades’ explosion of private lawsuits to enforce regulatory statutes
pertaining to securities fraud (which took off
after the class-action reforms of 1966) or employment discrimination (which
took
off after Congress expanded prospective rewards for winning attorneys in 1976
and 1991). Some might put
environmental “citizen suits” (which Congress invented during the 1970s) in the
same category, though I’m skeptical about that, since the rewards allowed have
not been big enough to call into being a truly profit-motivated environmental
plaintiffs’ bar -- the private enforcers bringing those suits are motivated
more by environmental ideology.

But perhaps
there’s a limit to the analogy between public profit-seeking in the 19th
century and today. The governmental
profit-seekers of the 19th century -- characters like the fee-paid
naturalization clerks, fee-paid pension examining surgeons, fee-paid land
registers, fee-paid jailors, commission-paid tax ferrets, moiety-seeking
customs collectors, fee-paid district attorneys, for-profit prison contractors,
or prize-seeking naval officers -- were nearly all oath-taking public officers,
and in the few cases where they weren’t (prison contractors and some of the tax
ferrets), they did all their work under contracts with the government to
provide services for which only the government could contract. Doctors taking Medicare and “private
attorneys general” have much looser institutional ties to the state (if any),
and accordingly they are not culturally identified as part of “the
government.” Because of this, the state
can maintain “plausible deniability” as to whether its own power is channeled
or tainted by the profit motive of these actors. This seems particularly important for
“private attorneys general” and bounty-seeking: the state itself can still
profess to be disinterested -- it’s those private
attorneys who are self-seekers. I
suspect this helps maintain a reservoir of legitimacy for the state and for the
regulatory schemes associated with it.
And it may have practical implications too: when non-profit state actors
and for-profit private actors enforce the same statute (e.g., the SEC and
private securities bar), the state actor will typically have more formidable
investigative and coercive powers, meaning that some degree of separation
between profit motive and power is preserved.

All this suggests
that the definition of government as non-profit that American lawmakers
constructed a century ago retains substantial normative power, even if it has
recently been practically diminished in some important contexts and -- as Michaels
emphasizes -- now faces a conscious and well-articulated intellectual critique. That critique, explains Michaels, is part of
a broader decline of faith in the very notion of government as having an
organizational logic distinct from private industry. Listening to high-ranking agency officials
speak about management in recent years, one constantly hears them parroting
some business buzzword or other (entrepreneurship, innovation, flexibility, outcomes,
performance, metrics, customer service, deliverables, etc.). In Michaels’s view, administrators today need
to find a way of understanding, explaining, and justifying their mode of work that
is less obeisant to private-sector thinking.
Perhaps the book can help them in doing that, for it shows that the
non-profit norm (however beleaguered today) was forged through the kind of process
that every manager, private or public, must respect: experimentation, trial and
error, hard experience. The norm is not
the result of ignorance or timidity about the wonders of the profit motive, but
instead of more than a century of trying to harness the profit motive and
finding it unworkable in the context of the kind of democracy that emerged in
the 19th and early 20th centuries. As I
write in the book’s Epilogue, “the imperatives that historically drove
salarization in America were especially and sometimes exclusively directed at public offices -- at their peculiarly
monopolistic status, at their unique control of scarce public resources subject
to rival democratic claims, or at their distinctive mission to foster the
population’s cooperation and support for legislative mandates.”